Appraisal waivers and value acceptance on a mortgage

How value acceptance works

Fannie Mae's Selling Guide, section B4-1.4-10, says that for certain loan casefiles, Desktop Underwriter offers value acceptance, and in that case an appraisal is not required. For casefiles that are not eligible, DU requires an appraisal on the standard report form for the property type.

The system generally needs a prior appraisal of the same property in Fannie Mae's Collateral Underwriter data. DU compares addresses and uses the earlier appraisal to decide whether the new casefile is eligible. A prior appraisal that was flagged for overvaluation, or that could not be scored, is not used, and no offer appears.

The lender decides whether to use the offer. Under the same section, a lender can exercise value acceptance only if the final DU submission produced the offer, no appraisal is obtained for the loan and the offer is no more than four months old on the note date. Because the offer depends on the final submission, changes such as a new price or loan amount can make it appear or disappear. Lenders can also choose to order an appraisal instead.

Which transactions are eligible

Section B4-1.4-10 lists the transactions Fannie Mae will consider:

• one-unit properties, including condos
• principal residences and second homes
• investment property refinances
• certain purchases, limited cash-out refinances and cash-out refinances
• DU casefiles with an Approve/Eligible recommendation

Being in one of these groups does not guarantee an offer. It only means DU will consider one.

Which transactions are excluded

The same section lists transactions that are not eligible for value acceptance:

FHA, VA and USDA loans follow their own appraisal rules.

What you give up

Skipping the appraisal saves the appraisal fee and can shorten the timeline. It also removes two protections buyers often rely on without realizing it.

An independent value check. An appraisal tells you whether the price is supported by recent sales. Without one, nobody outside the transaction checks whether you are overpaying. If you need to sell or refinance in a few years, the market will.

A second look at the property. An appraiser is not an inspector, but appraisal reports note visible condition problems that can affect value or eligibility. Without that visit, the home inspection is your main look at condition.

There is a contract question too. Many purchase contracts include an appraisal contingency that lets you renegotiate or walk away if the appraisal comes in below the price. If no appraisal is done, ask your agent how your contingency works.

Protecting yourself

• Always get a home inspection. Value acceptance says nothing about condition.
• Check comparable sales. Your agent can pull recent sales, or you can review public records.
• Ask about fees. If you paid an appraisal fee up front and the lender uses value acceptance, ask whether it will be refunded.
• Ask the lender. If you want an appraisal, say so and ask whether the lender will order one. The decision is the lender's.

The bottom line

Value acceptance, formerly the appraisal waiver, lets some Fannie Mae loans close without an appraisal when DU offers it and the lender accepts. It can save money and time, but it removes an independent check on price and a second look at the property. Keep your inspection, check comparable sales yourself and ask the lender about an appraisal if anything looks off.